Borrower Joe has an existing loan that requires 15 more years of monthly payments of $1,004....
Borrower Joe has an existing loan that requires 15 more years of monthly payments of $1,004. He is considering refinancing the loan balance of $117.095.08 with a new loan at the current market rate of 5.675% for 15-year loans. Both the old loan and the new loan require 2 points plus $500 in origination fees. What is the NPV of the refinancing decision at an opportunity rate of 5.675%? Should Joe choose NOT to refinance his existing loan.
Homework Answers
Since, NPV of refinancing is negative, Joe should not refinance the Loan. In case origination fee of 2 points plus 500 is only charged once i.e. only on New Loan, refinancing can be considered. In that case NPV will be positive i.e. $ 1553.90
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Borrower Joe has an existing loan that requires 15 more years of
monthly payments of $1,004....
The mortgage on your house is five years old. It required monthly payments of $ 1,422,...
The mortgage on your house is five years old. It required
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interest rates have fallen and so you have decided to refinance,
that is, you will roll over the outstanding balance into a new
mortgage. The new mortgage has a 30-year term, requires monthly
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a....
The mortgage on your house is five years old. It required monthly payments of $ 1,422,...
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The mortgage on your house is five years old. It required
monthly payments of $ 1,422, had an original term of 30 years and
had an interest rate of 9% (APR). In the intervening five years,
interest rates have fallen and so you have decided to refinance,
that is, you will roll over the outstanding balance into a new
mortgage. The new mortgage has a 30-year term, requires monthly
payments, and has an interest rate of 6.125 % (APR).
a....
please show all work!
8. *Eight years ago you borrowed $200,000 to finance the pur- chase of a $240,000 home. The interest rate on the old mort- gage loan is 6 percent. Payments are being made monthly to amortize the loan over 30 years. You have found another lender who will refinance the current outstanding loan balance at 4 percent with monthly payments for 30 years. The new lender will charge two discount points on the loan. Other refinancing costs...
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